Reed Elsevier 2013 Results

27 February 2014

Reed Elsevier, the global professional information company, reports continued underlying growth in revenue, operating profit and earnings in 2013.



Commenting on the results, Anthony Habgood, Chairman, said:

“Reed Elsevier is continuing to deliver on its long term strategic and financial priorities. With underlying revenue growth across all major business areas, operating profit and earnings grew well in 2013. We made good progress on organic development and portfolio reshaping, and our strong cash flow enabled us to step up our share buyback programme whilst maintaining balance sheet strength. We are recommending a +7% increase in the full year dividend for Reed Elsevier PLC and +8% for Reed Elsevier NV, in line with growth in adjusted earnings per share at constant exchange rates.”

Chief Executive Officer, Erik Engstrom, commented:
“In 2013 we remained focused on transforming our business profile and improving the quality of our earnings. We did this primarily through organic investment, supported by a small number of targeted acquisitions, and by exiting from several businesses that no longer fit our strategy.”

“We continued to take a pragmatic approach to ensuring that the value compounding within the business translates into shareholder value, and as part of this we increased our share buyback programme to £600m in 2013. In 2014 we again intend to deploy a total of £600m on share buybacks, reflecting our strong balance sheet and cash flow.”

“Early trends across our business in 2014 remain broadly consistent with 2013, and we are confident that, by continuing to execute on our strategy, we will deliver another year of underlying revenue, profit, and earnings growth“.

REED ELSEVIER FINANCIAL AND OPERATIONAL HIGHLIGHTS

Reed Elsevier continued to make good progress against its strategic and financial priorities in 2013.

Revenue of £6,035m/€7,121m; underlying growth +2% (+3% excluding biennial exhibition cycling): The overall underlying growth rate of +3% reflects +5 to +7% growth in electronic and face-to-face revenues, which now account for 81% of the total (2012: 79%), partially offset by continuing print revenue declines.

Adjusted operating profit £1,749m/€2,064m; underlying growth +5%: Underlying operating profit growth across Reed Elsevier reflects a combination of process innovation and portfolio development. Reported operating profit, after amortisation of acquired intangible assets, was up +3% to £1,376m/down -1% to €1,624m.

Return on invested capital 12.1%, up by 0.4%pts on 2012: The ROIC increase was driven by the increase in adjusted operating profit.

Interest and tax: Adjusted net interest expense was £39m lower at £177m (€56m lower at €209m) reflecting the benefits of term debt refinancing initiatives over the last 18 months. The adjusted effective tax rate was unchanged at 23.5%.

Adjusted EPS up +9% to 54.0p for Reed Elsevier PLC; up +5% to €0.99 for Reed Elsevier NV; constant currency growth +7%: Reported EPS growth was +9% to 48.8p for Reed Elsevier PLC, +5% to €0.91 for Reed Elsevier NV.

Equalised full year dividend up +7% to 24.60p for Reed Elsevier PLC; up +8% to €0.506 for Reed Elsevier NV: The proposed average full year dividend growth rate is in line with adjusted EPS growth at constant currency rates. The proposed final dividend for Reed Elsevier PLC is up +6% to 17.95p following an +11% increase in the interim dividend. The proposed final dividend for Reed Elsevier NV is up +11% to €0.374, following a +2% increase in the interim dividend. The difference in interim and final dividend growth rates reflects exchange rate movements between the declaration dates. The Reed Elsevier PLC and Reed Elsevier NV full year dividends are covered 2.2x and 2.0x by adjusted EPS respectively.

Net debt / EBITDA 2.1x on a pensions and lease adjusted basis (unadjusted 1.6x): Net debt was £3.1bn/€3.7bn on 31 December 2013. Capital expenditure remained at 5% of revenues. The adjusted operating cash flow conversion rate was 97%.

Organic development: In 2013 we continued to develop our global technology platforms across the business, launch new products and services in both existing and adjacent market segments, and extend our reach in high growth markets and geographies.

Acquisitions & disposals: In 2013 we completed 20 small acquisitions of content and data assets across all market segments for a total consideration of £230m. We also completed the disposal of 26 assets that no longer fit our strategy, for a total consideration of £331m.

Share buybacks: In 2013 we deployed £600m on share buybacks. In 2014, although we currently expect disposal proceeds to be lower, we again intend to deploy a total of £600m on share buybacks, based on our strong balance sheet and cash flow. £100m of this year’s total has already been completed.

2014 OUTLOOK
Early trends across our business in 2014 remain broadly consistent with full year 2013, with some small variations by market and geography. We are confident that, by continuing to execute on our strategy of delivering improved outcomes to our professional customers, primarily through organic investment, we will deliver another year of underlying revenue, profit, and earnings growth in 2014.




Adjusted and underlying figures are additional performance measures used by management. Reconciliations between the reported and adjusted figures are set out in note 4 to the combined financial information on page 28. The reported operating profit figures are set out in note 2 on page 25. Unless otherwise indicated, all percentage movements in the following commentary refer to performance at constant exchange rates. Underlying growth rates are calculated at constant currencies, and exclude the results of all acquisitions and disposals made in both the year and prior year and assets held for sale. Constant currency growth rates are based on 2012 full year average and hedge exchange rates.

† Comparative financial information has been restated following the adoption of IAS19 Employee Benefits (revised), see note 1 to the combined financial information on page 23.

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